Ispat Industries (BSE code 500305) is currently trading at Rs 24.55 (52-week high/low Rs 87/Rs 18). Ispat Industries is one of the leading integrated steel makers in India with its headquañers in Mumbai. It produces sponge iron, galvanized sheets and cold rolled coils as well as hot rolled coils with flexibility in choice steelmaking. The company has facilities for both conventional blast furnace and electric arc furnace, which provide freedom in choice of raw material feed and provide cost competence to the company. On the financial front, the company posted a topline of Rs 2,875.78 crore against Rs 2,600.52 crore during the previous quarter with a growth of 10.58 per cent, while the bottomline has declined to Rs 28.73 crore against Rs 48.89 crore during the same period, which has declined 41.23 per cent. The company has increased its operating margin (16.56 per cent in Qi FY09 against 15.64 per cent in Q4FYO8) but unable to maintain the net profit margin. The decline in its bottomline has been attributed to the interest and financial charges, as well as the foreign exchange loss of Rs 189.62 crore. During the period, the company has issued and allotted 11,32,44,580 equity warrants to promoters on a preferential basis. The warrant can be converted into one equity share at a price of Rs 44.69 per share with a 18-month conversion period. This shows the confidence of the promoters at the company’s growth prospects. The realization of the warrant money would be utilised for on part- redemption of 12 per cent cumulative redeemable preference shares allotment and part of it will be spent on the company’s expansion projects. At the same time, the company is planning to invest Rs 3,200 crore to set up a 110 MW dual fuel based power plant, coke oven plant of one MTPA and a two MTPA pallet plant at company’s Dolvi complex. The softness in global steel prices remain a concern for the steel industry which makes the company’s short-term picture not so rosy. We advise you to book losses.
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